The Nigerian Federal Government has approved a withholding tax system to boost revenue generation.
The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, disclosed this in a statement through his official X handle on Tuesday.
He said the approved withholding tax regime, which involves the deduction of tax at source, provides for the exemption of small businesses from withholding tax compliance and reduced rates for businesses with low margins.
Accordingly, he noted that the tax system gives exemptions for manufacturers and producers, such as farmers, and includes measures to curb evasion and minimize tax avoidance.
Oyedele explained that the withholding tax system will ease the process of obtaining credit and the utilization of tax deducted at source. It also includes changes to reflect emerging issues, adopts global best practices, and provides clarity on the timing of deductions and the definition of key terms.
“As part of the ongoing fiscal policy and tax reforms, a new withholding tax regime has been approved,” he stated.
He added that the approved tax regulation is expected to be published in the official gazette in the coming days.
Recall that withholding tax was introduced into the Nigerian tax system in 1977 to serve as an advance payment of income tax on specified transactions.
In July 2023, President Bola Ahmed Tinubu inaugurated the Oyedele-chaired committee to address key challenges in Nigeria’s tax system.
Nigeria collected N12.37 trillion in revenue in 2023. Similarly, in the first quarter of 2024, Nigeria’s revenue collection surged to N3.94 trillion, with a target of N19.4 trillion for the entire year.
Meanwhile, the Debt Management Office recently announced that the country’s total debt profile increased to N121.67 trillion as of the end of March 2024.
